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Canada's housing boom is over, bank says

VIRGINIA GALT

Globe and Mail Update

Latest comment posted at 1:21 PM EST 27/06/08

TD economists say increases in house prices have cooled considerably, but flip side is that homes are becoming more affordable ...Read the full article

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  1. Brian Thompson from Calgary, Canada writes: Yesterday's stats from Vancouver: 19214 active listings, 119 sales

    Check the inventory level vs. previous years here:

    http://paul-northvancouverhomes.blogspot.com/
  2. Sue W from Canada writes: In Toronto, thanks to Miller and his Duplicate Land Transfer Tax, it died before the usual cyclical market forces could hit.

    Has Miller and his Council figured out yet what new Tax will replace the dwindling LRT?
  3. CallofDuty . from Toronto, Canada writes: LOL...love these reports that are after the fact. Shouldn't the posters here be considered physics since we saw this coming like a year ago?
  4. Beer and Popcorn from Canada writes: The housing boom must end in David Miller's Toronto
  5. Michel Frechette from Kapuskasing, Canada writes: I wonder what new and exciting incentives will we see next? How about a 500 year mortgage?
  6. Sam Grey from Canada writes:
    This is old news. Anyone that didn't have there head in their a$$ knew that it has been a buyers market out there for months.

    My street in Toronto has 5 houses for sale. The most I've seen since I've lived there. One of them has a "reduced" sticker on it.

    Miller is not only to blame. Blame the recession, blame the record high gas prices, blame rising mortgage rates, blame plunging consumer confidence.
  7. Anti Elvis from Calgary, Alberta, Canada writes: I wonder what shrill the real estate boards will use to whitewash this one? Even out west, in a hot economy prices have cooled. Nothing can go up forever, money is a finite resource & I suspect there are alot of young people out there maxed out. God help them if the coming energy crisis wipes out their jobs.
  8. Not That Martin from Toronto, Canada writes: As per Toronto housing... There was an interesting little piece done in MacLean's magazine last month that discussed the effect of oil prices on the suburbs and how there is a new influx of people moving from the burbs back to the city's core due to the new economics of commuting. With this in mind I think real estates buyer's/seller's status is very dependent on neighborhood now. In areas I'm familiar with (Cabbage Town and Riverdale) houses are still getting snatched up usually on the first day they are available for snatching, with multiple bids and bidding wars, with the end result almost always being a house sold over asking. I'm not saying this is still a seller's market in "all" of Toronto, but let's not be ignorant either, there are still a lot of people willing to pay too much to live in specific neghborhoods downtown. This is not going away anytime soon, thanks to the escalating price of oil, regardless of how hard Miller tries to gauge us.
  9. Carmen Rae from Canada writes: CallofDutywrote: "LOL...love these reports that are after the fact. Shouldn't the posters here be considered ***physics*** since we saw this coming like a year ago?"

    Well, most sure can't be considered educated or proficient spellers.
    ;)
  10. Closely Watching from Canada writes: Ran out of greedy speculators? I guess they all shifted their attention to the oil patch. It'll soon be time to invest in real estate again after the prices drop.
  11. whatevah D from Canada writes: Not That Martin: I agree. Houses aren't having much difficulty selling in my area, which is just north of the beach. In fact, semis are going for mid-400s now. If it levels off at that price, it's fine with me.
  12. Carmen Rae from Canada writes: "Michel Frechette from Kapuskasing, Canada writes: I wonder what new and exciting incentives will we see next? How about a 500 year mortgage? "

    I guess that product would be comparable to renting for life.
  13. Guess Who from Canada writes: Another lame report by TD just to do some publicity.
  14. Binder Dundat from Toronto, Canada writes: It is rather idiotic to blame David Miller for what has happened to values in Toronto. People had no trouble paying huge sums over asking price -- but a new tax is going to kill the market? I don't think so.

    No, what we're seeing is an affirmation of the old wisdom: "No tree grows to the sky".

    Or maybe the TD economists behind this report are just a bunch of bitter renters who are priced out of the market -- isn't what what some people on these discussions like to say about real estate bears?
  15. Yves Farges from Canada writes: Now that the decline of real estate values is common knowledge & actively talked about for half a year, the Economists can finally confirm what every other Canadian has know for a year: real estate prices are down. No doubt the next information gem we will get from the bank economists will be who won last year's superbowl ... it is safe now guys, honest, you can say it.

    As the recession deepens in the U.S., this is not good news for us because our economy is strongly linked. It is too bad that the TD economist did not tackle an interesting subject requiring hard work, like how integrated the U.S. and Canadain economy actually is compared to the late 1980's, so that we can think about how hard the coming recession will be compared to the last one.
  16. god bless canada from Canada writes: it makes it sound like houses are going to get cheeper when in fact they are just not going to rise as fast.i always love the way they make the headlines housing market boom over when it should read housing back to normal rate increases on 1-2 %
  17. David R from Canada writes: We don't own our homes anyway...the Canadian Govt does. If your home rises by $100,000 in ten years, make sure you factor in the taxes (rent) that you pay to the crown of around 6-7k/year....thats $70,000 to our GREAT Gov't....so you may gain $30,000.

    Then minus your expenses/upkeep....you lose. Corporate Gov't wins...always.

    Only in Canada.....ONLY.....do the research, and prepare to be shocked...again.
  18. Hound Dog from Canada, Canada writes: All good things go in cycles and finally come to an end and housing is no exception

    With rising energy prices and soon to be rising interest rates, it more than likely that the Canadian economy will further slow down and the Canadian housing market will continue to weaken.

    Globally the housing is slowing down significantly especially in places like the USA, the UK, Australia and Spain. These are same places that enjoyed significant gains in real estate values and obviously one should expect these same markets will return to long term norms.

    You can blame the global central bankers for the initial rapid rise in real estate and the follow on decline in real estate.
  19. Nick Palas from Canada writes:
    In Toronto for the first half of June sales down 15%, undsold inventory up 17%.

    Anyone with a Basic knowledge of the SUPPLY and DEMAND concept knows what that means! Its simple:

    Lower Sales Higher Unsold Inventory = Lower Prices

    We will see this within the coming months.
  20. Jim Somerville from Ottawa, Canada writes: High oil prices are going to be death to the suburbs? I think high oil prices are going to lead to eventual death of the downtown office. More telecommuting....the technology is here now, the government should be pushing the concept. Just one day a week of home office would save an awful lot of gasoline.

    http://himmicane.blogspot.com
  21. Binder Dundat from Toronto, Canada writes: Beer and Popcorn,

    I thought the decline in sales in Toronto this winter was due to the mounds of snow! At least, that's what the industry was saying at the time.

    And how would you explain similar declines in other markets, away from (the admittedly dreadful) Miller and McGuinty?

    Let's assign blame where it truly lies, and not where it feels best.
  22. Michael Peters from Canada writes: LOL - I think TD saw this coming and has blitzed mortgage shoppers with their bogus 7% cash-back mortgage. If they can't sucker the dumb into 40 year amortizations or 0% down, let's fool them into thinking that giving them 7% of their mortgage back to them in cash is a real deal. You gotta love it.
  23. Tiu Leek from T.O, Canada writes: "High oil prices are going to be death to the suburbs? I think high oil prices are going to lead to eventual death of the downtown office. '

    I've been thinking/wondering/guessing along those lines as well.

    The role of office buildings is primarily the administration of either production of goods, or sales of those goods.

    If production declines, is there as great a need for office buildings?
  24. Brad Wood from Houston, United States writes: Well I read a report where they predict oil to be $70/bbl in a couple years. We can't sustain $130/bbl oil and pay mortgages at the same time. We wont be able to afford the movie package with the cable company. Dang I had TBS and all the advertising.
  25. Freddie B from Woodbridge from Canada writes: Unless you are a speculator, this is probably healthy for homeowners wanting to upgrade and new home buyers. I would rather my house be worth $150,000 less than today. I would save sales commisions and I would pay less transfer tax on my new house. Also, with record sales in the past and astronomic home prices, what has McGoofy done with all the extra tax? And as Sue W. from Canada states, where are the politicians going to get their revenue?
  26. Mike H from Grande Prairie, Canada writes: Michael Peters from Canada writes: LOL - I think TD saw this coming and has blitzed mortgage shoppers with their bogus 7% cash-back mortgage. If they can't sucker the dumb into 40 year amortizations or 0% down, let's fool them into thinking that giving them 7% of their mortgage back to them in cash is a real deal. You gotta love it. "

    Doesn't TD always have a cash back mortgage? For that matter, I bet if you check pretty much any bank they have one. Why not, they charge a higher interest rate onthe mortgage, so its not really costing them any money.

    I suppose it makes sense if you are one of those 30 year olds who still lives at home and doesn't own anything. You could use the money then to purchase your furniture, appliances, etc.
  27. bill k from Canada writes: Nick Palas from Canada writes:
    In Toronto for the first half of June sales down 15%, undsold inventory up 17%.

    Anyone with a Basic knowledge of the SUPPLY and DEMAND concept knows what that means! Its simple:

    Lower Sales Higher Unsold Inventory = Lower Prices

    We will see this within the coming months.

    Reality will be a hard pill to swallow for many. POP.....what was that?
  28. John H from Canada writes: Already seeing lower prices for the last few months. As a mortgage broker doing re-finances, appraisals are coming in lower. These articles are just like the forecasting of oil markets by the economists. They are reactionary at best. Why is it there are still some out there that believe we are not in a cycle down and we are separate from the states?
    This time they sneezed and the whole world is getting pneumonia. When the US Peso hits 30 cents you all better be experts in chicken farming in your garage...
  29. Mister Kong from Toronto, Canada writes: In reference to the earlier discussion on the "death of suburbs vs the death of the downtown office". I would submit that whether a not a worker is telecommuting the suburbs are still built around a car while the downtown core is build around transit and good'ol walking. I live and work in the core and seldom use my car for anything other than car trips to the suburbs to see friends or trips to the cottage. There are few places you can go in suburbia that do not require a car trip of some sort. Certainly telecommuting would help the problem, but centralized living still wins if you're talking about reducing your gas expenditures and your carbon footprint.
  30. Jack Donnelly from Calgary, Canada writes: What's happening are the twits buying houses and flipping them to make a quick buck are now losing money. That's the good news.
    The next thing will be a load of houses on the rental market by these same twits.
    In Calgary there are lots of houses are being sold in my neighbourhood but there's also a lot of them up for sale.
  31. Paul G from Toronto, Canada writes: The market is moderating. Since this is the next best thing to a crash it should make the Chicken Littles who have posted here for the last three years happy.

    While they were in their parent's basement on the computer house prices have gone up 35 percent. That's leveled off now and the Chicken Little's can rejoice!

    These same losers still can't afford their own home.
    ...
  32. Child of the North in Canada from Canada writes: Paul G is right. Housing is always cyclical, but the bottom line is that housing will continue to go up, up , up over time. Houses in desirable areas will continue to be out of reach to all but the wealthy few.

    As for the price of oil, I am optimistic on fuel alternatives in cars driving down the cost of oil. There is an interesting series of videos on Youtube (note: there are 10 parts and they take time to watch, but they are interesting).
    http://www.youtube.com/watch?v=hFifFR-4C28&feature=related

    I am thoroughly convinced alternatives to oil to run the planet are out there but they are not in mass production for one reason or another. Oil at 20/barrel made it hard to justify a switch but oil at the prices we see today will usher in alternatives very quickly.
  33. Ace Frehley from Canada writes: “housing remained stronger for longer than we had anticipated, largely due to increased affordability through new financing options, such as no money down or extended amortization.” TRANSLATION: we figured that if we gave Canada's young enough rope, they'd hang themselves. And hey, whad'ya know, we were right!
  34. Nick Palas from Canada writes:
    Paul G,

    You seem as a little bitter that the Real Estate Market is $hit.

    I can give you many articles from "economists" in 2006 that the US Real Estate marketed was "moderating" and then it crashed in 2007.

    Overleverage with a 0 down/40 year mortgage? It's not so bad....

    Hmmm..lets see:

    Home sales plunging across Canada
    Unsold MLS inventory at a Historical High in Canada
    Recession in Canada (GDP contracted 0.3percent in Q1)
    Record Oil Prices
    Rising Mortgage Rates
    Plunging Canadian Consumer Confidence

    You don't stand a chance in hell buddy...

    I'll Talk to you in a few months...

  35. charles ANTHONY from Canada writes: Highly paid indexed government professionals running a tax and spend agenda at the expense of the depleting financially strapped Majority. There is not one honourable politician in this country because to get to the top you must crush people ethically and morally. It is a giant con game as ABCP reflects. The "in" people have the judicary in their pocket. We need real justice in Canada and put some of these guys in jail and shrink their egos to regular size. For a country of 34,000,000 people we allow these out of control tax and spend zealots to cream us unlike any country in the world.
  36. Lyle Davey from Gibsons BC, Canada writes: Out here on the WET COAST home sales and prices are moderating in some areas.Listings for home sales are increasing although demand for townhouses in my local area is strong.I live in a 64 unit town house development 3 yrs. old and these units are all resales.They are selling as fast as they are listed, at least $50,000 more than 12 months ago. I bought new 3 yrs. ago at 189000,last week a unit like mine sold for 292000.On average a townhouse sells for 125000 less than a new de- tached 3 bdrm. home.Young families are buying these townhouses because they don't qualify for a mortgage on a detached home.A good building lot in my area sells for 200,000.This is expensive.
  37. Ace Frehley from Vancouver, Canada writes: Lyle Davey from Gibsons BC: just wait until BC Ferries slaps on the long-overdue fuel surcharge, then see if people find Gibsons such a bargain. That'll flatten your prices out in a hurry, if it hasn't already.
  38. Tyler Williams from seattle, United States writes: The fellow from Toronto has a point. The market is just moderating. While it is true that, during the past century, the prices of houses in Canada have gone up and down and up and down in many cycles, those days are over. From now until forever, house prices in Canada can only go up and go up, with occasional episodes of moderation (stable prices for a few months with no price drop), followed by more going up in price. That is how things are in Canada from now on. That is just how it is. It does not matter if gasoline goes to ten dollars a liter, or if the US economy completely fails so that nothing from Canada is bought, or if all the world's entire output becomes the domain of only China and India. Those would all be just irrelevant nothingnesses. The only trustworthy law that applies anymore in the universe is that house prices in Canada can only go up, they can never go down again. Ever. Okay, maybe moderate at a stable price once in a while for a few months, but then up again, and up and up, never dropping again. Ever. Not by a cent.
  39. Ed Long from Canada writes: Lyle ... Ace is right. The Sunshine Coast, Gulf Islands and Vancouver Island will be hit harder than most by energy inflation. It's happening already as my parents report increased foods costs in the Qualicum area.

    Townhouses, for a reference, in the Fraser Valley Real Estate Board, the largest in B.C., had 407 unit sales in May, 2007, and 359 units in May, 2008. Average price is up by 2.9%. Housing Price Index up 6.9%.

    Prices will not drop until we have had a full buying season, summer, of high listings, low sales.

    The biggest factor is not interest rates or within the industry. It is those three foot high numbers at every corner gas station.

    Energy inflation has every household examining their budgets and consumer spending of almost every commodity is being inhibited.

    We are in a period of caution and uncertainty.
  40. Old Sam Dark and Dirty from Republic of Newfoundland, Canada writes: I guess it depends on where you live. The housing market in NL sure hasn't slowed down. There are houses being built on every corner and it is almost impossible to get a contractor.

    I have 1 friend who is building his own house right now and later in the summer he is going to be building 20 more houses on land he bought a few years ago.

    The economy here is booming and house prices are still rising.
  41. Aloha Eric from Toronto, Canada writes: What, the boom is over?! I thought real estate was a fail safe investment! It never goes down in price, they ain't making anymore land you know (well, maybe they are in the US)! It's different this time/in Canada/where I live/in this area! Buy now or forever be priced out of the market!

    http://cowles.econ.yale.edu/P/cd/d16a/d1630.pdf
  42. slapdash dapoint from Canada writes: the hosuing market in the gta is a joke.

    we were looking last year to buy our first place, from toronto - orangeville -burlington and everything in between. the people selling were out to lunch. and the people buying the shoeboxes in the sky - well, seems to me like they were dropped from their balconies, half a mortgage payment for condo fees? ha!

    if the gf doesn't come around soon and get on board for home outside the gta, looks like there's only gonna be one of us owning anything anytime soon.

    you guys can keep you 300,000$ 800sqft "lofts" with 500 bones in fees/month. or the crummy 2 bedroom townhouses with no yard and one parking spot for simialr prices.
  43. S.L. S from Small Town, Canada writes: Old Sam Dark and Dirty from Republic of Newfoundland, Same thing here in Sask. It looks like an election with all the "for sale" signs on lawns and they're located on different houses everyday. Houses our flying off the market here as fast as they come on and the prices are going up, up up. New developments are popping up everywhere as well and are sold before the ground is even broken. This may be because of the resource boom out here but in my opinion it's more because of the new lending options available.Houses are definately out priced here and eally hope it stabalizs soon but for now it's still a sellers market here and the banks are winning big time. Thank godwe bought ours years ago and have no need or desire to leav at this time, just renovate.
  44. M Lennox from Toronto, Canada writes: FYI Miller haters,

    Property taxes in Toronto are lower than the suburbs, so the payback for the Land Transfer Tax is about 4 years. Also under Miller we’re seeing an annual increase of 4% when Mississauga just announced 4 years of 10% increases.

    Miller must be doing something right.
  45. B.Renine . from Canada writes: I fail to see people's reasoning behind the general opinion "0 down 40 year" people are mentally challenged.

    A person can rent and save for 10 years to afford a down payment and enter into a 30 year. (40 years)

    A person can also go with the 0 down 40 year option. I am 23 and have chosen to go this route. As an engineering graduate with a well paying stable job this gives me the option to own a home for less then the rent I was paying for a two (2) bedroom. I also picked up a steal on a foreclosed home by someone who obviously was fiscally irresponsible.

    My income potential is only up from here, so rather then waste time, I made a budget and saw a chance to begin gaining equity. Otherwise I would have continued to throw money away on rent and slowly build up a down payment.

    As my income rises, guess what, so will my payments! A 40 year gives me the option to enter the market with less risk should conditions change, and as my career advances suddenly that 40 year shrinks to 25 as the payments increase.
  46. Joseph Whistle from Canada writes: In Brampton you can find 1700 sq ft detached homes on 36 x 110 feet properties in the low 300's. Brampton has a good go-train connection to downtown, and the 410->401->427->QEW takes you right down town. Or, Hwy 7->427->QEW. Or, 401->Yorkdale mall.
    Brampton is often overlooked. It costs less than say Richmond Hill, and connect better to downtown in some cases.
  47. a salajan from To, Canada writes: These sprawling and wasteful neighbourhoods will not prevail in the long run.

    Absolutely!

    I bought a 2nd extension ladder and we are ready now to climb on top of each other in downtown Toronto (or Vancouver).

    Why there when my job is in suburbs? I don't know, but they say everyone will move downtown when gas hits 2L.

    Can't wait for the bubble to burst... I will buy adjacent (suburban) lots for penies on the dollar and expand my garden. Half acre backyard!!! Yoohoooo.
  48. Kevin Wells from United States writes:

    Michel Frechette from Kapuskasing, Canada writes: I wonder what new and exciting incentives will we see next? How about a 500 year mortgage?

    Michel: That's not beyond the realm of possibility. In Japan, multigenerational mortgages exist; e.g., 100 yr mortgages.
  49. slapdash dapoint from trawna, Canada writes: Ace Frehley from Vancouver:

    i'd rather the $250K, 12-1400sq/ft 3 bedroom home on a minimum 1/2 acre about 30-45 mins from the end of a go train line that i've been eyeing over anything "in the city". which would be a fine drive in my vw diesel, and a well outfitted green home to keep me warm in the winters.

    but you keep painting everyone in torontario with the same brush. i didn't mean to upset you, honey, i realise people in vcr have been throwing their money out the window for shoddily built condos for years now.

    you have your pie, i'll have mine.
  50. Ace Frehley from Vancouver, Canada writes: B.Renine . from Canada writes: I fail to see people's reasoning behind the general opinion "0 down 40 year" people are mentally challenged. ... *I am 23* -------------------------------------------------------------------------------- Exactly. Which means that the last time Canada suffered a serious economic setback, you were graduating from, what, grade 1? So I'm guessing that unemployment wasn't weighing too heavily on your mind at the time. Trust me, 11.4% unemployment (1993 - HRSD Canada, http://www4.hrsdc.gc.ca/indicator.jsp?&indicatorid=16) is not all $hit$ and giggles. Oh, but you have a "stable" job with nowhere to go up? I hope for your sake you are right on both counts. Otherwise, if you lose your job and the value of your home drops by even 5%, I can only wish you the best of luck, because you will need it.
  51. slapdash dapoint from trawna, Canada writes: Joseph Whistle from Canada writes: In Brampton...

    be serious. brampton is a sh!thole. even if you buy in one of the nice enclaves(we looked), you're still in brampton. i despise even driving in brampton - there's what, maybe 2 hours out of 24 when the traffic is bearable sometime between 3a-5a... barely.

    my gf has even said, after three years of not living there, that she'd never move back.
  52. M C from Montreal, Canada writes: As long as the banks keeps the lending taps open like 40yr amort. and cash backs high asking prices will be maintained because their will always be the greater fool.
  53. Old Sam Dark and Dirty from Republic of Newfoundland, Canada writes: S.L. S from Small Town, Canada.......

    Well the resource boom down here is directly related and the money coming from Alberta with our guys working 20 days on and 8 days off are driving a lot of it.

    I know of atleast 40 guys that are commuting back and forth from fort mac and they are all building houses for themselves and also building them to sell and they are driving the market. All those guys I know live in my community and it is not that big although we are basically a suberb of St John's.
  54. Ace Frehley from Vancouver, Canada writes: Slapdash: "but you keep painting everyone in torontario with the same brush."

    True, but only because I grew up there, went to school there, worked there for years and thus saw it first-hand.

    Suburbia is deliberately designed to force you into your car. Where I live I can (and do) walk everywhere. And it's amazing what happens when you do that... you have actual social intercourse with your neighbours that goes beyond road raging your way through a nauseating daily commute.

    As you said, you'll have your pie and I'll have mine.
  55. Emma Clark from Toronto, Canada writes: All those who believe the fall-off in sales in Toronto is a result of the new city land transfer tax, please take a look north. And west. And east. Sales in the 905 were down 13% year-over-year in May and 13% in the first half of June. Inventories are also up across the GTA although since the Toronto Real Estate Board doesn't reliably release those they're harder to track.
  56. Bella Forte from Vancouver, Canada writes: It's about time. I honestly do not understand how people can afford to buy these $600K starter homes in Vancouver (that's in the less desirable neighbourhoods). Even if you rented out your basement suite, that's still pretty unaffordable to a professional working couple. So, unless you get an inheritance, win the lottery, have a grow-up, or lucky enough to have bought a few years ago, you can never own a house? Where does that leave all the young couples and families just starting out? Something seems out of whack.
  57. B.Renine . from Canada writes: """Ace Frehley from Vancouver

    Trust me, 11.4% unemployment (1993 - HRSD Canada, http://www4.hrsdc.gc.ca/indicator.jsp?&indicatorid=16) is not all $hit$ and giggles. """"

    The unemployment rate for my profession in 1993 was 5%.
    http://www.jobfutures.ca/noc/213p4.shtml

    I also pruchased a home that I can afford should interest rates jump to 10%.

    "" I can only wish you the best of luck, because you will need it.""

    I will rely on my skills and abilites rather then luck. Better chances that way
  58. slapdash dapoint from trawna, Canada writes: Ace Frehley:

    i'm the same: born and raised here - and i hate it. if my company would just give in and transfer me out to halifax, i would live in the city. went to school there: was there for school and had no car, no problem - everything is essentially a 20 miinute walk away.

    but i won't pay to live in or close to toronto. if i have to stay in ontario, i'd rather be up around collingwood or down around st catherines; take the train every day and enjoy a real quality life outside toronto.
  59. Emma Clark from Toronto, Canada writes: The Toronto Real Estate Board releases figures twice a month:

    http://www.torontorealestateboard.com/consumerinfo/marketnews/index.htm
  60. Ace Frehley from Vancouver, Canada writes: Bella Forte from Vancouver, Canada writes: I honestly do not understand how people can afford to buy these $600K starter homes in Vancouver. ... Something seems out of whack. ------------------------------------------------------------------------- 1. They can't; and therefore 2. It is. This is why the smart money has not been entering this market for at least a year.
  61. ronin x from vancouver, Canada writes: Out here, the best hope for a couple or family moving in is to settle in Vancouver proper, east side, near a Skytrain station. Suburbs are still a mess, though.

    You can get anywhere you need to go in the city within 10 minutes. The express busses are a godsend. It's suddenly very easy to stop driving in this town.
  62. Ace Frehley from Vancouver, Canada writes: B.Renine: if you want to think you are immune to the world around you, fine. But we share the same line of work and I can assure you of two things. First, a lot of my friends lost their jobs in the early 90s. Second, the unemployment rate in a particular job sector is only part of the story. Engineers who lose their $70k jobs don't stay on the unemployment lines for long -- they find replacement work fast. Only they find it pays FAR LESS.

    Result: in a downturn the engineers are less likely to be unemployed than the general population, but their paycheques tend to shrink dramatically. Hear me now, believe me later. But I understand that you don't want to hear this right now -- the resulting cognitive dissonance is probably a bit much to deal with.
  63. Fred Johnson from Canada writes: I dont think the author of this article and TD Bank are quite right in their forecasts for the Alberta market. An economic corollary exists between oil and gas prices and real estate in Alberta. Recognizing the role in-migration plays (the absence of which right now is acting to cap values) and the investment cycle lag-time between the price increase of natural gas, real estate in Alberta is more likely headed substantially higher in 2009/10. At the moment there is a veritable tidal wave of cash flowing into Alberta from everywhere else in North America as the result of the doubling in price of this product. If the price increase holds, a significant amount of new money will find a home (quite literally) in new residential, commercial and industrial real estate in Alberta. On a personal level people may find they can buy and enjoy only so much of Phoenix and Palm Springs.
  64. Mitchell Cardno from Calgary, Alberta, Canada writes: Am I one of the few that is seeing big large red flags here? Especially with the statement that prices will fall in Alberta by 8-10%?
    Because I like to relate to examples. Let's say a person were to finance a 300k mortgage over 40 years @ 5% with no down payment (60% of new home buyers opt for the "new - 2006" 40 yr mortgages)

    Monthly payment = $1446.59 - pmt(5%/12,40*12,30000)
    Property tax @ 0.5% assessment = $125 / month
    Condo Fees / Monthly upkeep = $300 / month
    Total cost of owning a place = $1872 / month

    That's pretty affordable right? But what happens when your house value drops by 10%? How long will it take to recover that 10% in equity (30k) by making these monthly payments?

    TEN YEARS!!! It will take 10 years of these payments to build up only 10% of equity that a person may have lost on a 40 yr mortgage. 10 years to "save" 30k only to have it erroded by market conditions.

    What do you think will happen when the interest rates go up, and 60% of first time home buyers on a 40 yr mortgage renew in 5 years and realize that they owe more on their house than what they could potentially sell it for?
  65. B.Renine . from Canada writes: Ace Frehley from Vancouver, Canada writes

    ""if you want to think you are immune to the world around you, fine. .""

    Firstly, I certaintly don't believe that all the future holds are good things. I am planning for all circumstances, be them good or bad.

    A difference that I have thought about is the age of the work force. Certainly in the early 90's there was a large percentage of extablished boomers in the hay day of their careers. In my association they are scrambling to find a way to keep employees as 80% of our workforce is able to retire in the next five years.

    ""the resulting cognitive dissonance is probably a bit much to deal with""

    Yep. Thats correct. I hate it when reality conflicts with my pre-determined viewpoint. I refuse to change. You nailed it on the head.
  66. Binder Dundat from Toronto, Canada writes: Mitchell -- you're not the only one who sees the red flags. Something's definitely not right with that picture. I remember people getting slapped hard in the bust of 89-91, and I think many are setting themselves up for something worse.

    I learned my lesson in the tech bust. Ouch!
  67. Ace Frehley from Vancouver, Canada writes: Mitchell: those are the exact red flags that many of us have been raising for some time. The banks call extended amortization "innovative products" to improve affordability. I call them suicide pacts with your borrowers. The only thing that longer amortization improves is the ability of the seller to jack the price. Well, the markets across the country have mostly swallowed up that extra price stimulus now. Buy on 40-year amortization and pay roughly what you would to rent... only now you take the risk of being saddled with a $300k debt and having nothing to show for it should even the slightest economic storm pop up. That's a pretty stupid risk to take IMO.
  68. Mitchell Cardno from Calgary, Alberta, Canada writes: I guess I forgot to add the premium that one must pay to CMHC of 3.1% of the mortgage amount for borrowing 100% of the cost, along with an added 0.6% premium for the extended 40 year mortgage.

    3.7% on 300k = $11,100.

    mortgage including the insurance cost is now $311,100 on that 300k house. I'm sure the banks don't mind rolling that extra 11,100 into your monthly payments at that 5% interest rate (an extra $53.52 in my example).

    Something scarier? After those 10 years, you've only accumulated 20k towards your equity as the other 10k went to the insurance premiums...

    Better hope that the perceived value of homes don't even have a hiccup
  69. slapdash dapoint from trawna, Canada writes: Mitchell Cardno:

    all the info you've posted, while not exactly what i was thinking at the time, was pretty much the reason why i had no problem walking away from home after home our real estate agent showed us. apparently when the client gives them price ranges, they tack another 50-70g's on it and expect you go along.

    we were lucky enough to be able swallow our pride and secure a little family financing to help with our downpayment which brought to at least 25% of our max price. but even still, watching what was going on in the states last summer/fall made me extra skeptical of what was to come.
  70. Michael Peters from Canada writes: B.Renine - if you can stomach a rise in interest rates on your high-duration mortgage, good for you. You are one of the 0.0001% of people who may have used the 0%/40 year option responsibly. Also, good for you for finding a place you could buy with mortgage payments that were less than your rent. I'm not sure what market you're in, but here in Toronto, I find renting to be a more economical option than buying and paying the bank interest. Not to mention property taxes, real estate/legal fees, and the myraid of other costs of ownership.
  71. Crimson The-Red from Canada writes: Mitchell has very good points, zero down and 40 year mortgages are a bad idea, especially if the buyer ends up selling the house within 10 years through a real estate agent.... any equity would go to the agent, heck you likely owe them more $$ for their commision then you had equity in the house, plus if you broke the lending term for the mortgage another 2 to 3 months of interest is owed to the bank.
  72. Tim M from Vancouver, Canada writes: Affordability is the key. Housing s currently unnaffordable for people getting on the property ladder, therefore no-one can move up, therefore it stalls then corrects until it's affordable again.

    Look at the sums. In Vancouver there's not much for $300,000. Even so, at 10% down, that's still repayments including taxes and fees of close 1800 to 2000 a month. That's for buying somewhere small that you're unlikely to want to live in for more than a few years as a FTB.

    Or you could invest your 30,000 downpayment, rent somewhere nicer for $1400 and save $500 a month for 3 or 4 years until prices are affordable again. Hmmm... Buying now is idiotic unless you find somewhere for the long-term. Condos will be most affected, SFHs less so.
  73. Alberta Green from Canada writes: Fred Johnson from Canada writes: "I dont think the author of this article and TD Bank are quite right in their forecasts for the Alberta market."

    -----------------------------------------------------------------------------------

    The only problem with that thinking is many people in Alberta are now sitting on the sidelines waiting as sales have fallen and listing have risen. Alberta is not the land of milk and honey as you paint it as wages have not kept pace with housing prices. Many people are now priced out of the real estate market as banks who where more than happy to loan money have now tightened their purse strings. Alberta price decline may not be as severe as the rest of Canada but in order for Alberta real estate market to remain healthy price MUST come down.
  74. S.L. S from Small Town, Canada writes: Old Sam Dark and Dirty from Republic of Newfoundland, in your case it's the down homers bringing the cash home and driving the prices up. In the case here it's just the start of a resource boom that hasn't been established yet. Kind of like buying stock in an area that hasn't proven itself yet. Nonetheless it's been great for my own property values. 8 years ago I purchased this home for 80,000 and the recent appraisal put it at 350,000. I won't complain but then again I won';t dance for joy either since I do believe this to be temporary and we aren't planning on going anywhere at this time. I just find myself wondering where it will stop at and if this resource boom in this area will actually pan out or is it all just a pipe dream. What's going on in your area is great if you already have a home or properties but could come back to be painful in the future if Alberta resorts to a slow down. Nice of the people to bring the wealth home though but only if the local economy can take it. In your area I think your safe. It's a well established and beautiful area.
  75. Walter K from Victoria, Canada writes: Last week, a builder in Parksville, Vancouver Island put five luxury unsold condos up for auction in his complex. They had been languishing for over a year on the market. The selling prices on the units ranged from between 10% to 30% below the original asking price! Owners who pre bought before construction at full price, are concerned that their values have fallen. Interestingly enough, some Realtors feel that these lower selling prices should of never happened and other Realtors have stated that the selling prices were an accurate representation of today's true market value. Nevertheless, the builder was just happy to unload them. Naturally, this auction has sent a front page ripple throughout the Real Estate industry on Vancouver Island with concerns of how far will it go? Some Realtors are still attempting to defy market gravity with their spin doctoring on how much in demand this place is for the money asked. If you are an outside buyer, it pays to do your own independent research. You can save yourself dollars into the six figures if you know what you are doing. Many American property owners on Vancouver Island who bought when the Canadian dollar was worth about .70 cents to the U.S, are selling in order to take advantage of excellent deals now found in the U.S sunbelt. Some Canadians are following suit. The course of this year and next should be interesting as Realtors are being subjected to intense pressure to maintain current property values. The thinking now with some investors is to recoup with a marginal profit as they have a lot borrowed money to account for. Others are still defiant and arrogant that a big profit is their due and that someone else should pay them for what they ask.
  76. Wir sind das Volk from Canada writes: Is anyone amazed that the median house price in canada is 50% higher than the US despite the fact that they earn more money and pay less tax than we do? $208K?? that wouldn't get you a dog house in most Cdn cities...
  77. Charles Smith from United Kingdom writes: "The TD economists said they had expected the slowdown to occur before now, but "housing remained stronger for longer than we had anticipated, largely due to increased affordability through new financing options, such as no money down or extended amortization.""

    Is this code for: Houses are over-priced, we are in for a correction?
  78. Alberta Green from Canada writes: To Wir sind das Volk from Canada

    In response a while back in density levels in Calgary, I think the Europeans have solved that a long time ago. I find countries like the Netherlands have been able to build neighborhoods with high density but still retaining an area that is people friendly to live and work in.
  79. M J from Victoria, Canada writes: I subscribe to some nonpartison analysts who expect a bottom in most North American markets sometime around 2015-2017, but the perception of value will be influenced heavily by substantially higher oil prices, so the people who say "It depends where you live" are right to some extent, although all economic activity will be weighed down by the broader crisis in the USA as it unfolds, which could take 30-40 years.
  80. Back to the Future Past History from Calgary, Canada writes: Dear Readers, Yes Real Estate can and does fall but if it is the right kind it will recover. The nature of real estate is that it is fixed in location so cannot adapt to change very well. If the circumstances change, the utility (usefulness) of the real estate will change and the Value. In Calgary we have low demand for too big and too far away houses and high demand for affordable homes close to public transportation. Since most of the stock of condo apartments suck at accommodating raising children or pets that sector is over built. In the future buyers will need more food storage, a place to grow garden and locations closer to locally produced food. High Oil prices will change real estate values.
  81. Andrew Ballenthin from Toronto, Canada writes: The housing boom is well over due considering the speed at which it was out pacing the rate of inflation and economic growth.

    Interestingly, in past downturn cycles I've seen a new trend of home renovations and decorating begins to grow as people resolve to make the best with what they have until the market picks up again. It usually takes at least 6 months for this new cycle to emerge in home renovation/DIY buying statistics but it always has.

    I believe the softening of the real estate market and ever increasing fuel and commodity costs will take us back to a model of community living and spending that was abandondend for retail park shopping. I'll be watching your reports over the next 18 months to see if a return to "home sweet home" and "think global, shop local" becomes our new way of dealing with pressures on our economy and making the best of changes that will only continue to accelerate over time. www.solsolutions.ca
  82. Anti Elvis from Calgary, Alberta, Canada writes: LOL, so David Miller cause the price of homes to fall across teh country ? Even in Calgary.
  83. Dick Garneau from Canada writes: The headlines should read, the housing market is getting back to normal. This is a good thing!

    .
  84. ld gus from streaky bay, Australia writes: Rent or buying does not matter. What matters is when you have enough resources to be free of the slavery of a regular job. Passive income. He who achieves that wins.
  85. Panty in a knot from vancouver, Canada writes: long bonds are going to go up in 3-6 months. THis will mean interest rates 1-2% higher in about a year. This will cause prices to drop by about 20%
  86. X Y from Toronto, Canada writes: There was an old joke: "My day weather forcast is late a day but it is acurate.

    The TD forcast is late too -- howevere, it is still to large degree inacurate and serves of "enhancing visibility of TD's expertise". We know their and other banks expertise already of trying to fatch more money: how banks are productive, their great customer service and timely/ accurate forecasts already.

    It is somewhat understandable that the people who suffered through the boom real estate are resentfull. The price gains (TO and many areas) are moderating. That is all. Not falling at all. You have the prices at the all time peak. People comming to TO, there is upward mobility, interest rates are excellent, can't see many people that are panic sellers. They can list the house but there is no need sell at lower prices at all. Instead of finding the real work and purchasing immidiately they are hoping for something that will not happen and only hurting themselves.
  87. bill k from Canada writes: Nick Palas from Canada writes:
    In Toronto for the first half of June sales down 15%, undsold inventory up 17%.

    Anyone with a Basic knowledge of the SUPPLY and DEMAND concept knows what that means! Its simple:

    Lower Sales Higher Unsold Inventory = Lower Prices

    We will see this within the coming months.

    Many people are looking to get out of housing before the crash gets worse. As inventory continue to increase and sales continue to drop, prices will continue to fall.
  88. RD Lone from Vancouver, Canada writes: It's interesting to note that they have multi-generation mortgages in the UK to keep on propping up the market. Read up on what happened there. :)

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